Where did the magic go?

I am all about Christmas spirit. I love it in fact. And this year I am doing my best to pull it together because I know that Milo's age is the perfect age for the belief in Christmas magic, Santa, elves, talking reindeer, snowmen that come to life, the whole works. So I found this lovely idea; Elf on the shelf that reports to Santa and with the help of the parents moves around your home every night to give the impression of flying to the North pole and back every night after the little one goes to bed.

The theory being that the Elf reports back to Santa every night to tell him if the little boy or girl has been good or bad and THIS is how Santa knows who is in his Naughty & Nice List. So you can imagine, I am totally in love with this idea as Milo has taken to his 3 year old independent spirit like water. He loves to inform me that he no longer needs naps, doesn't have to eat his veggies and can subsist totally on cookies, applesauce and no longer requires a bedtime. So a small Elf that tells Santa about this misbehavior sounds right up my alley. I am not above bribery and lies (aka presents and holiday magic) to get my son to behave.

The other night while Milo is in the bath I hide this little Elf up on the sconce in the hallway, high enough for Milo not to notice right away and still highly visible from his room while I read him the book about the Elf. Once he notices the Elf, he jumps down off my lap and runs right over to the Elf. Looking up at the Elf, for we have been told that the Elf cannot talk to us, nor can we touch him, Santa's rules naturally. Milo decides he is not real.

Mom: Oh he is a pretty cute little Elf
Milo: He is small
Mom: He is small, good eyes Milo
Milo: What does he do?
Mom: Well he is an Elf from Santa to watch over us and report back to Santa (it is only at this point that I realize this project has the flavor of Big Brother to it)
Milo: How he do that?
Mom: Well he watches us and then at night when you are sleeping he flies back home to Santa at the North Pole to tell him all about what you and Finn are doing and then he flies back to us in the morning before you wake up. Do you remember the book we just read, that was about him.
Milo: (Staring at him intently) He is not real Mom.
Mom: Sure he is, he just can't talk to us, Santa's rules.
Dad: What is this Mom?
Mom: Well this an Elf that Santa sent us to watch over us to see if Milo and Finn are being good and listening
Dad: Oh wow, Mom that is pretty cool.
Milo: Dad, he isn't real, he is just a doll. (And he runs back to his room)

I was crestfallen. Sure I expect to encounter this at age 8-9 for sure, but at 3??

After he went to bed, I moved the Elf to another post, high up on our Christmas tree. In the morning, Milo came running in to my room to tell me the Elf had moved. He looked excited. I was feeling so hopeful. We ran out to the living room, we looked and looked for him. Mark came out to help and they spied it together.

Dad: Look there he is Milo!
Milo: Where? Where?
Dad: (Lifted Milo up for a closer inspection) Here he is
Milo: He doesn't talk Dad, and he can't move by himself. He is not real. He is just a doll
Dad: I think he is real, just because you can't see something, doesn't mean you shouldn't believe in it.

Great answer Mark!! Our little skeptic still remains with us though. He is cautiously reverent about the Elf, he looks for him in the morning. However my warnings of, "Milo you better eat your dinner, so the Elf doesn't go back to see Santa and tell him you didn't listen to your Mommy." To which I get the reply, "Oh Mommy, he isn't real, he can't fly."

Mark and I talked about it, Milo definitely believes in the magic and he has faith. He believes in Santa, he believes in fairies, he believes God can answer his prayers. He just doesn't believe in little stuffed elves on top of a shelf that don't talk to him.